Cryptocurrency Related Stocks Tumbling in a Massive Divergence from Crypto Assets
2021 has been an explosive year for crypto assets, with the total market cap rising from less than $790 million to nearly $2.5 trillion.
The face-melting uptrend in the crypto market has regulators warning about being cautious. Just this week, Bank of England Governor Andrew Bailey repeated the same words of caution: “Buy them only if you’re prepared to lose all your money.”
Responding to the question of financial stability, he said the central bank was well-positioned to respond to any threats that might arise.
He then objected to the use of cryptocurrency, saying, “I’m afraid crypto and currency are two words that don’t go together for me.”
“They have no intrinsic value,” said Bailey at a press conference Thursday.
Yesterday, SEC’s new chairman, Gary Gensler, also talked about the need for a regulatory framework for crypto exchanges to protect investors’ interests.
While the regulatory concerns are ramping as the crypto industry gets matured and the bull market rages on, the same repricing is absent from the crypto stocks.
The most popular crypto stock COIN has been on a decline ever since its launch in mid-April. After its stellar opening that saw Coinbase’s share price hitting nearly $430, it is currently trading down at $256.
“In crypto public equity world, last 5 days seems to be a massive rotation from “biz in crypto” to “alts I can trade,”’ noted Thomas Lee of Fundstrat. However, these are not equivalent rotations as compared to the over 40% drop in COIN share prices; crypto assets have surged much more violently, easily having a 40% run-up in a single day.
Marathon Digital Holdings is also having just as much of a rough month as MANA stock prices fell by 45% since early April. Silvergate Capital is another example, with SI's share price down 41.5% in less than a month.
This massive divergence between crypto stocks and crypto-assets points to both retail and institutions being more interested in the pure crypto plays than indirect exposure through companies dealing with cryptocurrencies.